Weekly VAT News

GfC 8: Help with VAT compliance controls – new section on temporary reduced VAT rate

HMRC have published a new section (10) of their Guidelines for Compliance 8: Help with VAT compliance controls, covering the temporary reduced VAT rate for children’s meals, tickets and family attractions. GfC 8 sets out what HMRC consider to be best practice for VAT accounting and compliance processes. The guidelines are intended to support businesses to establish a tax control framework, enabling businesses to identify and assess risk, and put in place appropriate controls to reduce those risks. The new section first sets out the parameters of the temporary reduced rate, which applies from 25 June 2026 to 1 September 2026 (inclusive), and notes that businesses are expected to pass the benefit of the reduction on to customers. The guidelines then set out examples of both risks that may arise and controls that may help businesses reduce the risk of error and support accurate reporting. Risks highlighted include systems limitations, such as booking and point-of-sale systems; identifying supplies that qualify for the reduced rate, including eat-in versus takeaway meals; promotions and discounts; and advance bookings and payments. The guidelines also note that businesses must ensure the correct VAT rate is applied from 2 September. (Contact: Adam Routledge)

RCB 5 (2026): Temporary reduced VAT rate for children’s meals, tickets and family attractions – updated

HMRC also published an update to RCB 5 (2026) on the temporary reduced VAT rate for children’s meals, tickets and family attractions. The updated RCB adds new sections on ‘Sales through agents, tour operators and ticket platforms’; ‘Party packages’; ‘Free meals promotions’; ‘Prepayments’; and “Flat rate scheme supplies’. With respect to sales through agents, tour operators and ticket platforms, the temporary reduced rate does not apply to margin scheme supplies under the Tour Operator’s Margin Scheme. Businesses providing party packages and free meals promotions must determine whether they are making single or multiple supplies. Where separate supplies are made for a single price, a fair and reasonable apportionment must be made. Where VAT was already accounted for at the standard rate on advance payments taken before 25 June 2026, and it was later decided to apply the temporary reduced rate, the appropriate adjustment must be made in the VAT account on or after 25 June 2026. Where prepayments were taken between 3 June 2026 and 25 June 2026 for admissions to qualifying attractions subject to the reduced rate, businesses may choose to account for VAT at the reduced rate. Where a customer has prepaid and VAT is recalculated at the reduced rate, “any overpaid VAT should be passed back to the customer”. The reduced rate does not apply to the flat rate scheme. The update also states that the relevant legislation does not define ‘child’, and that “HMRC will treat a child as anyone under 18 years of age”. (Contact: Katy Sweaton)

RCB 7 (2026): Changes to the VAT Capital Goods Scheme

HMRC have published Revenue and Customs Brief 7 (2026) on changes to the VAT Capital Goods Scheme (CGS) made by The Value Added Tax (Amendment) Regulations 2026. From 29 July 2026, computers and items of computer equipment have been removed from the list of assets covered by the CGS, and the expenditure threshold for land, buildings and civil engineering work has increased from £250,000 (exclusive of VAT) to £600,000 (exclusive of VAT). The RCB states that if a capital item fell within the CGS under the threshold that applied before 29 July 2026, it will remain within the CGS until the end of the adjustment period, and adjustments will have to be made even if the first adjustment period starts on or after that date. Computers and computer equipment acquired on or after 29 July are no longer covered by the CGS. The £600,000 threshold applies to land acquired on or after 29 July, and to buildings and civil engineering works acquired, constructed, refurbished, fitted out, altered or extended on or after that date. HMRC’s VAT Notice 706/2, Capital Goods Scheme, has also been updated. (Contact: Ben Tennant)

HMRC ‘one to many’ campaign – VAT on sales of prize draw tickets

The Chartered Institute of Taxation (CIOT) has reported that HMRC have commenced a one-to-many campaign to alert businesses running prize draws of HMRC’s view that VAT is due on prize draw entry fees. Recipients of HMRC’s letter are asked to review their records and check that they are accounting for VAT correctly on prize draw ticket sales, and to correct any errors. The letter states that if HMRC later find errors that that have not been corrected, HMRC will treat any disclosure made as ‘prompted’, which may affect the imposition of any penalties. (Contact: Andrew Clarke)